Who qualifies as a tipped employee and why does it matter?

Tipping, tip pooling and tip sharing is widespread throughout the restaurant and hospitality industry. In many ways it is a uniquely American custom to pay our waiters and bartenders in cash tips at an amount that each customer sees fit for the service received. It provides a special incentive to those in the service industry, but with it comes host of laws and regulations on both the federal and state level. To understand how the law treats tips and tipped employees we must begin by understanding what exactly a tip is and who qualifies as a tipped employee.

The law

The Fair Labor and Standards Act (FLSA) is the law that governs tipped employees on the federal level and these laws are regulated by the Department of Labor. On the state level, each state may have it’s own unique regulations of tips, particularly the major tourist states: California, Florida, Nevada and New York. Each of those states has very individualized laws in regards to tipped employees.  This article will focus on the federal guidelines that are mimicked closely by a majority of states.


The Department of Labor defines a tip as “a sum presented by a customer as a gift or gratuity in recognition of some service performed for him.” In order to be a tip it must be received from a guest without the influence of an employer. Thus, federal law does not include service charges such as mandatory banquet gratuities as tips, even if all, or a large percentage of the amount goes to the employee who provided the service.

Money only

Department of Labor regulations require that tips must come in the form of monetary value. Flowers, candy, or other gifts are not classified as tips.

Tipped employee

To be considered a tipped employee for federal purposes the employee must be one who “engages in an occupation in which he or she customarily and regularly receives more than $30.00 per month in tips.”  This means that every month the tipped employee must receive at least $30.00 in tips.

Irregular tipping

Employees who make more than $30.00 in tips on certain holidays or special events, but do not receive tips on a regular basis, are not considered tipped employee for purposes of federal law.

A per job basis

Additionally, the monetary amount of $30.00 is limited per job, whether it is full-time or part-time. If an employee works part-time but does not make $30.00 per month in tips, she is not considered a tipped employee. If an employee works two jobs and meets the $30.00 per month requirement in one job, she is only considered a tipped employee in regards to that particular job, and not in regard to her second jobs. The employee is defined as a “tipped employee” only for the particular job that meets the requirement.

Why does it matter?

Whether or not an employee is receiving tips and is considered a tipped employee is important in determining whether an employer is meeting minimum wage requirements and who can claim ownership of the tips. Further information in regards to these issues will appear in the next installment. For more details on tips and tipped employees contact a local attorney.[1]

[1] Ahmed, Rebecca, Legal regulations of tip pooling and tip sharing in the United States hospitality industry, University of Nevada (April, 2009) http://digitalscholarship.unlv.edu/cgi/viewcontent.cgi?article=1594&context=thesesdissertations